Milton Friedman – the Bumbling Old Man That Killed the American Dream
The events of the last 6 months are more significant than 911 and will no doubt result in more suffering. They are partially a result of the ideas of the man whose choir performs the surreal song called ‘The Corporation’, in the first video. A more apt title might be American Requiem. Two other videos are more in depth pieces by Milton Friedman: on limited government and appearing on Icelandic State Television in 1984 (oh the irony).
The United States has recently had to nationalize the majority of mortgage lending and is in the process of nationalizing large sections of the banking industry which is now rated below Namibia. US treasuries are less credit worthy than the McDonalds hamburger chain’s, the stock market has had a worse week than during the crash that brought on the Great Depression, banks have completely stopped lending to other banks and ships are sitting in docks unable to sail without letters of credit. This cancer has spread, and with banks in many other countries being nationalized to avoid collapse, the IMF said today that we risk systemic global financial meltdown. And this is the sober world of finance.
The reason why this happened is not because of subprime mortgages, Collateralized Debt Obligations or Credit Default Swaps any more than the USSR fell apart because of Boris Spassky’s inferior chess strategy or a cunning plan by Ronald Reagan. Russia fell apart because of the increasingly powerful economic engine of the West and adherence to a flawed, extremist ideology.
The emergence of China’s economic leviathan is the root cause destabilizing effect that turns leveraged debt in the form of CDOs and CDSs into nation busters, but second component, the extremist ideology came from an unlikely source, a nice old man with patrician charm.
The nice old man was Milton Friedman, part of the Chicago School of economists who dreamed up monetarism, an extreme form of laisser-faire capitalist economics, not far removed from Social Darwinism. Economics is arguably not a science and I suspect that monetarism, when treated scientifically, reveals a scientific misunderstanding in its core premise, by thinking of the economy as a closed system rather than open one. I’ve outlined this hunch on my blog and I’d love if someone better qualified than me could someday prove it, however a formal proof of its fallacy is not required to identify its problems when adopted as ideology. Monetarism’s problems started when it morphed into a self-contradictory political ideology called Libertarianism which will be defined as the period from Reagan until Monday afternoon.
Political ideology is like diet, moderation and balance are good. You can’t have unregulated capitalism or people will make money out things like slave trading. Similarly you can’t have totalitarian socialism or you end up with everything run like the DMV, with unmotivated people doing things that people don’t want, slowly, and in drab environments.
On an ideological level, there is nothing consistently libertarian about flag waving Reaganite Republicans, or there wouldn’t be an American army or flag. There is also nothing intrinsically socialist about French left-bank intellectuals or there wouldn’t be any cafes or any music, after all, there is nothing more entrepreneurial than starting a band or opening a cafe. Both extremes are self contradictory, and the truth is somewhere in the middle, to paraphrase the architecture critic, Rayner Banham: politics is about creating a well tempered society.
Libertarianism is like Joseph Heller’s Catch 22, a form of political ideology where there is no polis, no society, to be political about. As with anything with a logical flaw, its adoption has ended up revealing that flaw. In this case, a Libertarian approach to capitalism, denying the existence of government, and therefore regulation, has ended up with the government owing much of the economy. This is a far, far worse outcome than if there had been well regulated capitalism in the first place.